NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Matthew A. Schmitt

UCLA Anderson School of Management
110 Westwood Plaza, D513
Los Angeles, CA 90095-1481

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Massachusetts Institute of Technology

NBER Working Papers and Publications

October 2016When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization
with Leemore Dafny, Christopher Ody: w22745
Branded pharmaceutical manufacturers frequently offer "copay coupons'" that insulate consumers from cost-sharing, thereby undermining insurers' ability to influence drug utilization. We study the impact of copay coupons on branded drugs first facing generic entry between 2007 and 2010. To overcome endogeneity concerns, we exploit cross-state and cross-consumer variation in coupon legality. We find that coupons increase branded sales by 60+ percent, entirely by reducing the sales of bioequivalent generics. During the five years following generic entry, we estimate that coupons increase total spending by $30 to $120 million per drug, or $700 million to $2.7 billion for our sample alone.

Published: Leemore Dafny & Christopher Ody & Matt Schmitt, 2017. "When Discounts Raise Costs: The Effect of Copay Coupons on Generic Utilization," American Economic Journal: Economic Policy, vol 9(2), pages 91-123. citation courtesy of

 
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